from LMcDuff08 — June 14, 2010 — “After last year’s appropriately dour Mad Avenue Blues, I felt we needed a more upbeat song. The result is Tech Star. Sung to the tune of Nickelback’s “Rockstar” this video takes a famous song and adapts it for tech start-ups. I am particularly appreciative of the tremendous enthusiasm shown by the various industry leaders who participated in the video. Your sense of humor will serve you well.”

Interesting read, especially with the study coming from the OPA… hardly an independent voice. However, it brings up a more holistic strategic question: How can we as an industry be doing a better job influencing share shift from broadcast and/or direct mail? Our competitors are not OPA sites versus portals versus ad networks; our competition needs to be anyone selling TV and traditional direct….

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Study Produced for Online Publishers Says Proprietary Content Is Better Channel Than Portals or ‘Ad Network
by Emily Steel

For a time, Internet advertising was a rising tide lifting all boats. But as ad spending ebbs, there are more arguments about where on the Web advertising is the most fruitful.

The fight over shrinking Internet ad dollars pits online publishers that offer premium content against major Web portals such as AOL, MSN and Yahoo. Portals and publishers, meanwhile, also have to compete with the ad brokers that sell often cut-rate leftover ad space on Web pages with less visibility.

Web publishers this week are pointing to a study — ordered up by their trade group — that they say presents evidence that ads on their prime pages offer more bang for the buck.

Online Publishers Association’s report
The Online Publishers Association — which represents creators of Web content such as New York Times Co., ESPN.com, MSNBC.com and The Wall Street Journal — on Thursday is releasing a study that finds that ads appearing on the portals and bought through ad brokers are significantly less effective than the premium ads they sell on their own sites.

“A brand marketer might be tempted in a recessionary economy to look for the lower-cost option. What this study shows is that the lower-cost option is not a productive solution,” says Martin Nisenholtz, senior vice president of digital operations for New York Times Co.

The study, based on research from the WPP PLC research firm Dynamic Logic, taps three years of data that include more than 4,800 marketing campaigns. Dynamic Logic offers a syndicated tool that big advertisers use to measure the impact of their digital campaigns.

The study shows, for instance, that online ad awareness metrics — where consumers remember seeing a brand or product advertised on the Web in the past 30 days — was 21% greater for ads on content sites than portals and 50% greater than ads placed in bulk by ad brokers.

Rates have begun falling for display ads, the graphical ads that border a Web page and make up the bread and butter of most Web publishers’ revenues. U.S. spending on display ads will drop 17% this year, to $4 billion, according to projections from PricewaterhouseCoopers. These declines come after years of rapid growth. It’s bad news for media companies trying to make up for even steeper declines in their traditional businesses.

Overall, U.S. spending on online advertising is expected to drop 3.2 % to $24.1 billion this year, according to PwC.

Big digital publishers long have charged high rates for the ads that appear on high-traffic areas of their sites, such as the home page. The argument is that their professional, proprietary journalistic content should reflect well on an advertiser, says Ed Erhardt, who oversees ad sales at ESPN, which is a unit of Walt Disney Co.

The Web portals and ad brokers, for their part, say that while big banner ads on a premium Web site often garner more attention than small ads, advertisers are paying high prices for relatively small audiences. The portals say they provide an easy way for marketers to make a big splash with consumers with a single ad on their homepages, which attract big audiences.

As the economy has deteriorated, many marketers have sought out cheaper options, like “ad networks” that sometimes sell ad space for less than $1 per thousand times the ads appear. In comparison, Web publishers try to sell ads for upwards of $10 per thousand appearances.

Some media buyers say the study oversimplifies the planning work that advertisers do, as ad space purchases on premium content sites, portals and through ad networks each serve a different purpose.

“You go to media conferences, and there is a portal contingent, there is an [ad network] contingent. Sometimes I feel like saying to all of them, can’t we just get along? You all have a place at the table, says Steve Kerho, senior vice president of analytics, media and marketing optimization at Organic, a digital ad agency owned by Omnicom Group that works with marketers such as Chrysler, Bank of America and Kimberly Clark.

Portals like AOL and Yahoo are trying to position themselves as a one-stop shop for digital advertising. “We see value for advertising in all three,” says Jeff Levick, AOL’s president of global advertising and strategy for Time Warner’s AOL division.

Some ad and Internet industry executives worry that comparative research about any part of the online ad business could hurt the whole industry, by confusing advertisers who are still new to the ins and outs of the Web — a small but promising part of the slumping ad business.

“The reality is that consumers are spending more and more of their time online. We as an industry have not made the bridge to large marketers as to why the dollars should shift as well,” says Bill Wise, vice president of business development at Yahoo. “It is all part of us getting more market share for digital.”

“As we approach the end of another year, we’re once again pleased to present the Silicon Alley 100, our annual list of the entrepreneurs, investors, executives, and technologists who are making waves in the New York digital business community.

Last year’s No. 1, Mayor Mike Bloomberg, has had his jersey retired (but we commend him for once again blazing entrepreneurial trails by doing away with annoying two-term rules). Union Square Ventures’ partner Fred Wilson, who hates lists like this, has deservedly taken his place.

Congratulations to this year’s winners and a hat tip to the impressive cadre of other folks we didn’t have room to recognize. As always, a huge thanks to our readers, whose votes and voices helped shape our second annual SA 100, and to our advertisers and sponsors, without whom we wouldn’t exist.”

Search giant Google has filed a patent application for a “water-based data center” that would use seawater for cooling and rely on ocean tides, currents, and waves for power generation.

The application, filed last year with the U.S. Patent and Trademark Office, became public knowledge on August 28. Google envisions “floating platform-mounted” data centers 3 to 7 miles from shore, in 50 to 70 meters (164 to 230 feet) of water.

As the global use of the Internet grows, more large computing facilities, or data centers, are needed to support the demand. But these data centers, many as large as 100,000 square feet, require large amounts of costly real estate and electricity.

Google’s plan strikes at both expenses. Data centers would be housed offshore, presumably where land prices are cheaper, and would generate their own electricity, said Data Center Knowledge Editor Rich Miller.

Miller said annual operating costs for data centers in the U.S. can run as high as $28 million per year in regions with relatively expensive electricity.

Google has been searching for ways to use more renewable energy sources, investing in solar companies and other startups through its foundation.

But schemes for harvesting ocean power from the natural motion of the water are still largely untested in commercial applications. Numerous pilot plants are under development around the world.

Google doesn’t intend to build its own wave energy machines, however. The patent application mentions the use of Pelamis P-750 Wave Energy Converter systems for generating electricity from waves.

The P-750 systems are made by the Scottish company Pelamis Wave Power. The company has built what it claims is the first commercial wave farm off the coast of Portugal. It has a 2.25 megawatt capacity, but the machines are still in commissioning phase.

Google isn’t the only company looking at placing data centers offshore. San Francisco Bay Area startup IDS would like to place them on decommissioned cargo ships, according to some reports. And Google might encounter resistance to its idea from businesses that don’t want important information residing on data centers that are less resistant to man-made or natural hazards, such as hurricanes.

Patent filings typically take 32 months for approval, according to the U.S. patent office. That means Google might not receive its patent on the floating data centers until October 2009.

The system envisioned by Google would be modular, meaning it could easily be scaled up or down depending on the need.

In one example, the patent application describes 40 Pelamis systems spread over a square kilometer to produce 30 megawatts of electricity.

The platform system would also use wind turbines to provide pumping power for the seawater cooling units.

I love Frank Addante because he is one of the only internet ad executives who looks younger than I do… I am not quite sure how old he actually is, but he definitely is NOT 18! We crossed paths briefly when I became CEO of a company he had earlier sold an ad server to.

In any case, I met with Frank a few weeks ago (he is founder and CEO of the Rubicon Project), and he is a great leader. This video is hysterical… enjoy!

A lot is being written about online media not being sold like “pork bellies”, or as a commodity. Those people are missing the point of the importance of syndication in today’s market. Publishers may not opt to send remnant inventory to ad networks, but rather BECOME ad networks themselves. Martha is doing it. Forbes is doing it. Viacom already does it.

Mike Shields of MediaWeek wrote a decent article summarizing this. While I think he missed my main point, the article is a good read….

ESPN Turns Off Ad Nets to Protect Brand, Content

The site recently cut ties with Specific Media and several other unnamed ad networks, and is taking the bold stand that ad selling that relies heavily on arbitrage and algorithms is not for them.

Mike Shields

Top Web publishers are planning a revolt. Even as more prominent sites experiment with selling remnant inventory through online ad networks, and in some cases ad exchanges, ESPN.com is saying thanks, but no thanks.

The site recently cut ties with Specific Media and several other unnamed ad networks, and is taking the bold stand that ad selling that relies heavily on arbitrage and algorithms is not for them.

“We’re heading down a path where it no longer suits our business needs to work with ad networks,” said Eric Johnson executive vp, multimedia sales, ESPN Customer Marketing and Sales. Sources say that ESPN would like to rally support from other publishers behind this move, and ultimately tamp down ad networks’ growth. Turner’s digital ad sales wing is rumored to be considering a similar move, though officials said no decisions are imminent.

“Turner, like a lot of media companies, is currently reviewing all of its media practices, and ad networks are certainly a part of that process,” said Walker Jacobs, senior vp of Turner Entertainment New Media Ad Sales.

ESPN’s decision crystallizes a philosophical debate in the online ad sales industry that has intensified since the Interactive Advertising Bureau’s annual meeting last month, when during a keynote address Martha Stewart Living Omnimedia media president Wenda Harris Millard gave her now famous warning against selling Web inventory like “pork bellies.”

Two sides have formed—those who want to protect traditional, direct selling of premium content brands, and the math-loving crowd which favors automation and data. The math lovers make the traditional sellers nervous.

“There is a genuine concern about commoditization of brand inventory by some of the networks,” said Millard in an interview. She’s concerned that such a debate is happening so early in the Web’s development as a business. “We haven’t even established the value of our medium, and all of a sudden it’s about price. That is very bothersome to people who are brand stewards.”

Of course, there’s a reason that online ad networks, which rose to prominence in the late ’90s by aggregating inventory across thousands of smaller Web sites, are playing a bigger role in Web publishing. Most large sites are swimming in avails they can’t sell. Insiders estimate that 20 percent to as much as 70 percent of inventory can go unsold at a given time. Thus, ad networks offer a monetization alternative.

And in recent years, to differentiate themselves, more of these companies have been touting themselves as ‘premium” ad networks, talking up their associations with the ESPNs of the world when they meet with ad agencies. “Nobody comes into a meeting and says, ‘I’ve got a bunch of lousy sites,’” said Mike Cassidy, CEO of Undertone Networks.

That doesn’t sit well with some publishers, like ESPN, who see networks as profiting on their brand investments and their user data, while also threatening their own marketer relationships. Many just think using networks devalues the power of content.

Several publishers, in conversations with Mediaweek, privately applauded ESPN, and hoped that others would follow suit. But applause doesn’t necessarily translate to action.

“I don’t see it happening,” said John Battelle founder/chairman/CEO Federated Media, a company that represents numerous blogs. “I suppose certain premium brands could say, ‘I’m above the fray. Our inventory is all very valuable.’ With that there are some problems.”

Central among those problems is that in this accountability-driven quarter-by-quarter business climate, it’s hard for any publisher to walk away from revenue, even if it’s not huge.

According to Pam Horan, president of the Online Publishers Association, most publishers do just that.

For example, MTV Networks recently inked a deal with Microsoft to let the software giant sell its remnant inventory. Nada Stirratt, executive vp, MTV Networks Digital Media (herself a former top sales exec at ad net giant Advertising.com) said that ad networks “absolutely have a place for high frequency, low value impressions.” Plus, she likes tapping into Microsoft’s tech expertise, and is comfortable with the numerous safeguards the deal offers.

Even Tina Sharkey, chairman, BabyCenter.com (and a former AOL exec) who gave a well-received presentation of the value of branded sites relationships with their readers at the IAB meeting, defended the network model. “Ad networks play a vital role in the online advertising ecosystem.”

So can ESPN change the model? “It won’t have the desired impact,” said Adam Kasper, senior vp, director of digital media Media Contacts—unless the top ten or so Web sites followed suit.

The networks themselves don’t seem worried. Tim Vanderhook, co-founder of Specific Media, said he hopes that his company would end up working with ESPN again in the future, and doesn’t believe that big name publishers can afford to ignore networks. down the road.
“Specific Media’s publishing partners come and go in the network throughout the year as we constantly assess the cost and performance of their ad inventory for our advertisers,” he said.
“If several, or even all, big name publishers stopped working with us, it would hurt the publishers themselves more than us…The online advertising business is all about targeting and publishers can’t do it on their own because they don’t have enough data.”

Kasper, and many others, believe that data will be essential to online advertising’s future.
“They’re [ESPN] essentially fighting technology. That’s a hard thing to do.”

But ESPN and other publishers may opt to invest in their own ad targeting technology. In the meantime, they’ve got the option of trying ad exchanges, which promise more control.
“We think of the exchange as a solution to all of these discussions,” said Bill Wise, general manger, global exchange, Yahoo – which acquired the exchange company Right Media last year.

Wise emphasized that since exchange companies don’t purport to be ad sellers, but rather provide a selling platform, they are safer than ad networks. “You take a big risk in letting other people represent your brand,” he said.

As for commodization fears, Wise quipped, “Well, gold is a commodity.”

Over the holidays a friend of mine bought a new iMac, got creative, and went crazy. Here is his account and his subsequent video….

“After being a life-long PC user (and quietly disturbed by the implications of association with the PC guy), the Mac world seemed very new and exciting, though with a steep learning curve. I figured the best way to get to know the new software was with a project, so I acted on an idea for a parody based on the crisis on Wall Street this last year (yes, while a banker in my day job, I’m a frustrated comedian at heart). I created a video and posted it to YouTube. It has gained popularity rather rapidly and has been featured by NYT DealBook and over a dozen other blogs and media outlets.

Wall Street Meltdown chronicles the bizarre events as they unfolded in the deal market in 2007: from the raging M&A and private equity markets of the first half to the whole subprime/CDO disaster that has caused such a deep crisis on the street. I posted the video under a pseudonym (Lady McDuff is the name of my yellow lab).”